BRIEFS

China, Japan agree on joint currency unit

Woman tops Hurun rich list

A woman has topped the Hurun list of China's richest people for the first time. Cheung Yan, the 49 year-old founder and chairwoman of top Chinese paper packager Nine Dragons Paper, saw her fortune balloon nine-fold to US$3.4 billion following her firm's March initial public offering. She brushed aside two-time leader Huang Guangyu of GOME Electrical Appliances and a number of CEOs at state owned enterprises on her way to the top. Her personal wealth leapt from US$375 million last year, when she was number 36 in the annual survey, compiled by Rupert Hoogewerf since 1999, to surpass appliances king Huang's US$2.5 billion. The 500 richest Chinese in the Hurun report are now worth an average of US$276 million, a 48 percent rise over the previous year, controlling a total US$138 billion in assets. The number of Chinese billionaires on the list increased to 13, from seven last year and just three in 2004.

China shoe tariffs may hurt 70,000 jobs

A European Union decision to impose anti-dumping tariffs on leather shoes from China may affect 70,000 jobs, said an official from the Ministry of Commerce. At the beginning of October the EU imposed a 16.5 percent tariff on leather shoes imported from China over the next two years, which Lu Jianhua, director of the ministry's foreign trade department, said could affect US$730 million worth of Chinese exports. China has repeatedly expressed dissatisfaction at the move. "China isn't dumping shoes in Europe," said one official at the Ministry of Commerce's fair trade bureau, adding that China's industry is competitive, with most shoe exporters either private or foreign invested enterprises that "cannot afford to sell at prices below their cost".

NASA chief makes first China visit

The head of NASA took part in talks with his Chinese counterpart in September during the US space agency's first visit to China. As part of a six-day trip to China, NASA chief Michael Griffin toured the Chinese Academy of Space Technology before meeting with Sun Laiyan, head of the China National Space Administration. The trip was intended to give NASA a chance to learn about China's space program. However, officials for the space agency said plans for the visit to include a tour of the rocket launch centre in the Gobi desert "did not work out". Beijing is keen to cooperate with the US on space exploration but Washington has been hesitant due to concerns about the involvement of China's military in its space program. China launched its second manned space mission last year and wants to send an unmanned probe to the moon by 2010.

Suez targets Chinese water market

French utilities provider Suez Environment is targeting two municipal water management contracts every year in China as part of an aggressive expansion strategy. Suez has won four full-service water contracts for Chinese cities since the market was opened up in 2002 and, prior to that, had built 160 joint venture water treatment plants across the country. It was also named as the preferred bidder of a US$1 billion, 30-year contract for the city of Changshu, near Shanghai. The company said it hopes to win a large slice of the US$150 billion China plans to spend on water management projects over the next decade. The country suffers from severe water shortages in the north while existing water resources are frequently mismanaged or contaminated.

China to become Egypt's top trade partner

China will move ahead of the US to become Egypt's largest individual trading partner within eight years, Rachid Mohamed Rachid, the Egypt's minister of trade and industry said in Beijing in September. Rachid stressed that China - which racked up trade with Egypt worth US$2 billion in 2005 - is not merely a source of consumer goods but was becoming a key provider of investment and technology. The two countries have agreed to set up a US$500 million Chinese industrial zone in Egypt for joint investment in textiles, footwear and pharmaceuticals. Rachid, who in February criticized the US for halting trade talks in response to fraud and violence in Egypt's parliamentary elections, observed that Beijing put economic opportunity first. "That makes it easier to do business with China," he said.

US tariff bill scrapped

US Senators Charles Schumer and Lindsey Graham said they would abandon legislation threatening China with a 27.5 percent punitive tariff if it failed to revalue its currency. Instead, they now favour a new bill they plan to develop early next year. The senators told reporters at a news conference with the Senate Finance Committee Chairman Charles Grassley and Senator Max Baucus they had accomplished their goal of focusing more attention on China's strict exchange rate controls, which they believe gives Chinese companies an unfair trade advantage. Schumer credited the controversial bill for a rise of more than 4 percent in the value of the yuan since July 2005, but said it was time to change tactics. Grassley, whose committee has jurisdiction over trade, said the new bill would not be narrowly focused on China but look broadly at the issue of how the US should respond to countries that do not fairly value their currency.

China welfare fund looks abroad

China's national welfare fund may start investing overseas. Top fund officials said that the fund, which has assets of US$29 billion invested in financial instruments like bank deposits, bonds and trust funds, may start looking at European markets as a potential destination. Overseas investments will include stocks and bonds, said Xiang Huaicheng, head of the National Social Security Fund, during a financial forum. The amount to be invested would depend on market conditions with no fixed quota. In June, state media quoted Xiang as saying the fund may invest between US$500 million to US$900 million outside the mainland by the end of the year.

Profits up 23 percent at China's top 500

The profits of China's 500 top businesses rose 23 percent in 2005 to US$81.4 billion, the China Enterprise Confederation said. Petrochemical, natural gas exploration, banking and ferrous metals companies accounted for almost half of the total, or US$39.4 billion. Of the 500 companies, 349 were state-owned. Their total reported assets of US$4.9 trillion accounted for 95 percent of the total assets. The number one company by sales was state-owned China Petroleum & Chemical Corp, also known as Sinopec, which reported revenues of US$103.4 billion, up 30 percent from a year earlier. Profits climbed 108 percent to US$2.8 billion despite surging international crude oil prices. The State Power Grid, the country's biggest electricity supplier, was second in the list, followed by China National Petroleum Corp, the Industrial and Commercial Bank of China and China Mobile, the country's biggest mobile phone carrier. The 500 companies generated US$1.78 trillion in operating revenues last year, equivalent to 78 percent of the country's GDP, up from 73.5 percent in 2004 and 55.7 percent in 2001.

Cautious approach to financial futures

China's first financial futures product, a contract based on the index of the 300 largest Shanghai and Shenzhen-listed A-share companies, will operate under tight restrictions when the market begins formal trading late this year or early next year. The contract will be limited to a 10 percent daily fluctuation restriction - to which the underlying stocks are also tied - apart from on its last trading day. Contracts will be suspended during the day if they move more than 6 percent from the previous day's price. Trading scandals and poor regulation were rife when the country last tried its hand at financial derivatives, which led to the closure of the market in the mid-1990s. Futures products are seen as vital to China's financial reform as they give investors a means of hedging their risk, effectively insuring against possible downturns.

Social security fund selects custodians

China's multi-billion-dollar National Social Security Fund has selected Citigroup and Northern Trust as its custodian banks for overseas investment. The NSSF, which was established to fund living and medical expenses for the elderly and the poor, secured approval in May to invest up to US$5.5 billion dollars, or 20 percent of the more than US$26.5 billion it has under management, the fund said in a statement on its website. Citigroup spokeswoman Marine Mao confirmed the selection of the US-based banking group. "It is only Northern Trust and Citigroup that have been selected," she said. Xiang Huaicheng, head of the national fund, said earlier that it would invest up to US$800 million overseas by the end of 2006, mainly focusing on Hong Kong as well as US and European markets.

Official: China should ease banking curbs

China's largest banks may soon be allowed to establish their own private equity divisions, according to Cao Wenlian, the National Development and Reform Commission's (NDRC) vice-director of finance. "All the relevant agencies should consider allowing the three big banks (Bank of China, China Construction Bank and Industrial and Commercial Bank of China) to invest in private equity and venture capital now that they are allowed to establish asset management and insurance operations," he told the South China Morning Post. China has long banned banks from investing in non-core businesses to keep risk from spilling over from one financial sector to another. In 1999, Bank of Communications was forced to sell its holdings in China Pacific Insurance and a year later its stake in Haitong Securities. Construction Bank had to part with its stake in China International Capital Corp, the mainland's most profitable securities broker, during a 2004 restructuring involving a massive capital injection by the government. Mainland authorities have since been loosening the restrictions and the pace of change has been accelerating since last year as the deadline for China to fully open its market to foreign banks at the end of this year comes closer.

China's oil imports jump 17.6 percent

Oil imports made by China jumped 17.6 percent in the first half of 2006. Net crude oil imports from January to June hit 492 million barrels, 43 percent of the country's consumption, according to state media figures. China's economic boom has driven up oil exports in recent years and state companies have signed multibillion-dollar deals to exploit oil and gas in Africa, Asia and Latin America. The growth in overseas oil explorations is matched by efforts at home to develop new fields, promote conservation and seek alternative energy sources like nuclear power. The January to June imports include oil from Angola, Saudi Arabia, Iran, Russia, Oman, Equatorial Guinea, Yemen, Congo, Libya and Venezuela.

LNG deal could set pricing benchmark

China National Offshore Oil Corporation (CNOOC) has concluded a supply deal with Petronas in Malaysia to supply liquefied natural gas (LNG) to a terminal in Shanghai, according to Fu Chengyu, chairman and chief executive of CNOOC, in Hamburg. Fu said the deal could set a regional pricing benchmark for the resource, but that depended on Petronas. "If they say it is a benchmark, it will be a benchmark," he said, but refused to comment on pricing terms. The Shanghai deal is the first LNG supply agreement signed by China since 2002 because rising global prices for the commodity have made deals uneconomic for a local market in which the gas price is fixed. Industry officials said that the CNOOC-Petronas deal was priced at about US$5 to US$6 per million British thermal units, above the price paid for the contracts signed by CNOOC in 2002 with Australian and Indonesia suppliers. But the US$5 to US$6 price is well below market price for gas delivered into north Asia, which is in the range of US$9 to US$11. The Shanghai terminal is scheduled to open in 2008.

Official: China and US should team up on oil

China and the US should jointly develop oil fields to protect against supply risks and rising production costs, a senior Chinese official said. Zhang Guobao, vice chairman of the National Development and Reform Commission, made the comments days ahead of a planned meeting between top US and Chinese energy-policy makers. There is concern in the US that Chinese state energy companies are pursuing an aggressive overseas oil acquisition strategy in order to meet growing domestic demand. The Chinese companies do business in countries blacklisted by the US, such as Sudan and Iran, often sweetening deals with funding for infrastructure projects. Without warning or specific details on its calculation, Beijing imposed a windfall energy tax on both foreign and domestic companies last March.

Ping An to invest in China railway

Ping An Insurance has won government approval to invest US$1.2 billion in a major railway project. China's second largest life insurer plans to invest in a railway between Guangzhou and Wuhan. It is the first insurance company allowed to invest in a railway. "Ping An will work with the Ministry of Railways on the project," one source told the Hong Kong Standard. "The government will invest about US$6.3 billion in the railway and leave the other half to institutional investors." Ping An Trust, the investment arm of the company, will raise up to 80 percent of the money through a trust investment product that targets institutions.

Guangdong plans US$36.6 billion infrastructure spend

Guangdong plans to spend US$36.6 billion by 2010 to expand road and river transport and build ports. US$25.2 billion would be spent on road construction, US$11 billion on ports and US$441 million on river transport, Wang Zhirong, the provincial Transport Department's disciplinary and inspection section chief, told a news conference on the province's 11th Five-Year Development Programme agenda in Guangzhou in September. Wang said the province would have to find new ways to meet the cost, which is twice that spent in the previous five years. "The investment amount is big and the need for capital is great. We have to consider opening up the sector completely for private investment and issuing bonds to raise capital."

Murdoch sends wife to pitch MySpace China

Media tycoon Rupert Murdoch said that his wife Wendy Deng was working on a News Corp plan to take its MySpace social networking site into China. "We have to make MySpace a very Chinese site," Murdoch said. "I have sent my wife across there because she understands the language." News Corp CEO Murdoch bought MySpace, through which more than 100 million Internet users around the world shared text, pictures and video last year. Murdoch said that Deng, who is not employed by News Corp, was in China with company executives working on the political obstacles that foreign media groups encounter in dealing with Chinese authorities keen to retain some control over content. He said that MySpace China would likely have local partners with a share of around 50 percent.

Alibaba eyes global expansion

Alibaba, China's largest business-to-business e-commerce site, plans to go global in the next few years, according to Porter Erisman, vice-president of international marketing and business development. Erisman said the company raised its sights following its US$1 billion merger with Yahoo China in October last year and planned to triple the size of its overseas staff within a year or two in order to prepare for expansion. The firm, which was founded by chief executive Jack Ma in 1999, employs approximately 4,300 people, including 40 in Hong Kong and 10 in foreign centres. Its Chinese-language B2B site, which is exclusively for domestic trade, has 13 million members. Its international site, which is in English and focused on import-export dealings, has 2.3 million members in 200 countries. Alibaba collected more than US$100 million in revenue last year and is expected to make more than US$200 million this year, much of it from subscription services on its B2B site. Besides the B2B site, Alibaba also runs Taobao, the largest online auction site in China.

Online-ad market set for growth

Advertisers spent US$190 million on online ads in China in the three months from May to July, accounting for around 3 percent of total advertising spend in the period, according to a new report. "There is big space to grow," Hans Yu, the executive director of online-research company Nielsen/NetRatings in China, told the Wall Street Journal, citing the US where online-ad spending is about 6 percent of the total. The biggest spenders were in the automotive, computer, and electronics and consumer-goods industries. Banks and other financial-services companies, which dominate online spending in most other markets, accounted for just 3 percent. China Mobile was the largest online advertiser in the period with 3.1 billion ad impressions. Earlier this year, Chinese firm iResearch estimated that online advertising, including email, pictures, logos and classified ads on web sites, generated US$258 million in the first six months of the year and will likely reach US$575 million by the end of the year. In 2005, online advertising generated about US$390 million in revenue for Chinese websites, eight times the total in 2001, according to iResearch.

GE targets China, developing nations

General Electric plans to double its sales to US$50 billion in developing countries, including China, by the end of the decade, according to chairman and chief executive officer Jeff Immelt. The company has begun investing in developing technologies like medical imaging devices that will cost about a third of the price of current machines in order to expand in emerging markets, Immelt told the Detroit Economic Club. He also said he expected about 25 percent of GE's management team to come from outside the US by the end of the decade. GE has nearly 13,000 employees in China, and the company said earlier this year it would provide management and leadership training for up to 2,500 Chinese managers and government officials over the next five years. The company also signed an agreement with the Chinese government in May to spend up to US$50 million in China over the next five years developing more environmentally friendly technologies. GE's revenues in China totalled nearly US$5 billion in 2005.

Spending up 14 percent during Chinese holiday

Chinese consumers spent US$37.88 billion during the week-long National Day holiday, state media reported. The figure from the Ministry of Commerce is up 14.5 percent from 2005. It is also in contrast with numbers from Hong Kong retailers which showed virtually flat spending growth from mainland visitors this year. Spending appeared to be spread evenly between small and big cities with growth in some smaller cities surpassing that in bigger ones. Spending in Sichuan Province, for example, jumped 18 percent, some 2.5 percent higher than Beijing.

China Telecom to use Microsoft search

Microsoft will provide its Live Search service to China Telecom's 25 million broadband customers and more than 80 million Internet users. China Telecom wants to use the partnership to secure a larger share of the online market. It will also use Microsoft technology to make improvements to Best Tone, its voice search service. The US software developer has invested a large amount of money into its search engine in a bid to make up ground on Google. In China, the search engine has less than 3.7 percent of the market, behind Baidu on 50.3 percent, Google on 16.2 percent and Yahoo on 15.7 percent, according to research firm Analysys International. Microsoft's Windows Live technology will be used in China Telecom's 114 Web search network, providing voice, Internet, IPTV and mobile searches.

Venture capital spending hits US$558 million

Venture capital investment in China rose 136 percent year-on-year to US$558.1 million in the second quarter, the largest single quarter investment in more than two years, a survey found. The 54 deals completed also represented the largest number of agreements in a single quarter since Ernst & Young and Dow Jones Financial Information Services started running the survey in 2001. "The venture capital ecosystem in China is getting mature, although it is still very young," said Gil Forber, global director of Ernst & Young's venture capital advisory group. "Many of them [entrepreneurs and investors] have worked in a few start-ups before." Investments are also becoming more diversified. While IT accounted for 57 percent of total investments in the second quarter, there was greater interest in medical devices, healthcare services and alternative energy. The largest deal was a US$99 million investment in solar cell developer CEEG Nanjing PV-tech.

EBay China boss quits

The head of EachNet, eBay's principal internet auction site in China, has stepped down from his post. Martin Wu, who had been in the top job for a year, is to pursue opportunities outside of eBay, the company announced in September. Leff Liao will take over Wu's responsibilities in addition to running PayPal China, which provides EachNet's transaction processing services. The company also suggested that the two strands of its China business, now headed by one person, could eventually be merged. Wu's departure comes amid growing concerns about the fading fortunes of foreign internet companies in China. EachNet has been overtaken by domestic auction site Taobao, Google's Chinese language search engine is losing more ground to market leader Baidu, and Yahoo is struggling to make the most of its US$1 billion investment in Alibaba, Taobao's parent company.

Tighter land use rules released

The State Council announced an eight-point plan in September aimed at controlling land use as part of a wider bid to curb property speculation and runaway investment. The new rules include increased compensation for evicted residents and a requirement for more land to be sold through auction. In a statement on the Ministry of Land and Resources website, the State Council said, "The increase in the amount of land used for construction is too rapid. The expansion of low-cost land for industry is excessive. Illegal use of land and the phenomenon of occupying farmland have been repeatedly allowed." The directive warns local governments that they must bear responsibility for the protection of farmland and gain higher approval for the conversion of farmland to other uses. Local governments have traditionally resisted existing rules to manage land use, but the State Council said it would step up inspections and punish those who violate the new rules.

Property rules for foreigners fleshed out

Details of rules issued in July to slow foreign investment in the nation's property market were published in September by the State Administration of Foreign Exchange and the Ministry of Construction. In a joint statement, the two major Chinese government organizations said the rules aimed "to promote the healthy development of the property market". The 12 points in the document flesh out some elements of plans issued by various government arms in late July and are "mostly technical," Kenny Ho, an associate director at Jones Lang LaSalle in Shanghai told the Wall Street Journal. The rules, which established residency requirements and borrowing limits for certain transactions, will have their biggest impact on the margins of the market, partly because foreign investment is such a small portion of the property business, the newspaper reported.

Mixed views on auto show debut

China's first appearance at the Paris Motor Show left industry insiders and journalists unimpressed at the quality of the vehicles, but most observers recognized that the five car models exhibited by Chinese auto makers Landwind and Great Wall are the vanguard of a wave of Chinese-made automobiles in the near future. The consensus was that the Chinese were hawking low-grade vehicles at low price, but that they were making surprising progress in a very short time and could quickly narrow the gap with Western and Japanese cars. "I think we can look at the success of the Japanese brands and the Korean brands in Europe, and especially in France, and we can see the same pattern is going to be applied for Chinese ones too," said Elisabeth Young, head of Asie Auto which imports Landwind cars.

Brilliance to export 3,000 cars

Brilliance China Automotive will export 3,000 sedans to Europe, in a deal that underscores the company's ongoing efforts to develop overseas markets. Brilliance, best known for its minibuses, sells sedans under the Zhonghua brand name and owns 49 percent of a joint venture with Germany's BMW AG. The deal is with a European automobile-trading company. The company said the export agreement "will put Brilliance China's move to expand overseas on a firmer footing." China's exports of whole automobiles doubled in 2005 to US$1.58 billion, according to government figures. Despite its ambitious growth targets Brilliance lost US$14.3 million in the first half of 2006.

China gets more say at IMF

The International Monetary Fund has agreed to give China more voting rights. The move to give China, as well as South Korea, Mexico and Turkey more rights was supported by 90.6 percent of available votes, out of 85 percent required for major shifts. Although nominal, the increases are a first step in a two-year effort to redistribute votes among poor African nations and countries with growing shares of the world economy. The 184-member institution plans to adjust its existing structure by immediately boosting the quotas of these four countries and will later rework the voting rights of all member nations within two years. China's share of votes will increase to 3.7 percent. The US has 17 percent. While most countries back the plan, the Group of Seven industrialized countries that dominate the IMF have, at the same time, been urging China to ease its controls on the currency exchange rate. However, IMF chief Rodrigo de Rato said the move was not aimed at putting more pressure on Beijing to make its exchange rate flexible or undertake other policy changes. Welcoming the IMF changes, Zhou Xiaochuan, governor of the People's Bank of China, reiterated that China would reform its foreign exchange regime in a "gradual, effective, and controllable" way.